Speaker 1: Hey, everyone, welcome back to another episode of The Mark
Speaker 1: Moss Show where we talk bitcoin. We talked about the
Speaker 1: decentralized Revolution, and we try to bring you the education,
Speaker 1: up to the minute news and some interesting people to
Speaker 1: talk to each and every week. Bitcoin is difficult to
Speaker 1: understand and so it takes some time. You have to
Speaker 1: dedicate the time to that. Um. I'm in the studio
Speaker 1: today with Dylan Leclair. You can find him on Twitter
Speaker 1: at Dylan Leclair Underscore. Man, you gotta fix that. Uh.
Speaker 1: He's a he's a market analyst, Bitcoin magazine and U
Speaker 1: t x O Management. Um. He does amazing um on
Speaker 1: chain analytics. And he's got a good macro game as well.
Speaker 1: And UM, Dylan's young. He's young, but he is smart.
Speaker 1: He's put the work in and so that's what I said.
Speaker 1: Bitcoin is difficult to understand, but you gotta put the time.
Speaker 1: And I've had people ask me like, hey, explain bitcoin
Speaker 1: to me, like I'm five and in two minutes and
Speaker 1: I'm just like, dude, like that ain't gonna happen, like
Speaker 1: I can. You gotta commit the time to it, and Dylan,
Speaker 1: you definitely have thanks for joining me today. Mark. Be
Speaker 1: happy to be On. Uh. Yeah, I mean definitely have
Speaker 1: to have to take some time. And I think both
Speaker 1: of us have probably spent a few thousand hours thinking
Speaker 1: about this thing. So happy to happy to dive in.
Speaker 1: Here is it? What would you agree that? Um? Almost
Speaker 1: the more that you learn, the more you realize that
Speaker 1: you still don't know. There are no experts in bitcoin. Uh.
Speaker 1: And it's probably just you know, the amount of like
Speaker 1: disciplines it takes to understand bitcoin or really just kind
Speaker 1: of understand it from a certain angle. But you know,
Speaker 1: whether it's finance, the history, the history of money, economics,
Speaker 1: computer science like cryptography and that that whole history. Uh,
Speaker 1: you know, there's there's no one the energy revolution that's
Speaker 1: happening with bitcoin mining. Like if you claim to be
Speaker 1: an expert on bitcoin, you're life you're lying because this
Speaker 1: this is a different beast. But yeah, I mean I've
Speaker 1: I've put him a little bit of time in terms
Speaker 1: of trying to understand the finance side of it, you know,
Speaker 1: economic side of it. And I have to say it's
Speaker 1: a little bit surreal being on because I've learned a
Speaker 1: lot about kind of finance and Nikon from from your
Speaker 1: YouTube videos. Thank back in the day. So I appreciate it,
Speaker 1: Thank you, thank you. Yeah. I love. I love to
Speaker 1: focus on As you said, you kind of named all
Speaker 1: those different disciplines that you kind of have to know.
Speaker 1: I kind of like the political and like the historical
Speaker 1: side of things. Um, and so that's kind of where
Speaker 1: I focus. And you found yourself liking the analytics side.
Speaker 1: And uh, that's cool. Right. It's like this thread that
Speaker 1: kind of weaves through society and and it and it
Speaker 1: kind of intersects all of us differently, and that's that's good.
Speaker 1: That's important, right, And we can all kind of hit
Speaker 1: these different areas. So you're kind of on this analytic side, um,
Speaker 1: which I want to dig into. Um. But but but
Speaker 1: but why why analytics for you? Like, h were you
Speaker 1: like a math nerd? You don't look like a math. Yeah.
Speaker 1: Definitely definitely was the numbers guy growing up. Um, but
Speaker 1: really kind of just stumbled upon bitcoin more from like
Speaker 1: the finance side of things. I was I wanted to be. Uh.
Speaker 1: I was just good with numbers in high school and
Speaker 1: I'm like, all right, well i'll do business. Um. And
Speaker 1: so I started reading about the stock market and really
Speaker 1: just like very very simple things um and stumbled upon
Speaker 1: cryptocurrency bitcoin, didn't didn't know the difference in in late
Speaker 1: I'm still in high school at this point, UM, and
Speaker 1: just from a financial assets side of things, not like
Speaker 1: had had no other kind of computer background or even
Speaker 1: like monetary economic background. It was just like, oh, this
Speaker 1: is a thing that trades on charts, and I'm eighteen seventeen,
Speaker 1: eighteen years old and it makes sense. Uh and dove
Speaker 1: down it like down in the rabbit hole, really really hard. Uh.
Speaker 1: And kind of the transparency of bitcoin, the you know
Speaker 1: that the analytic side, I mean, the whole network is
Speaker 1: completely auditable. UM. That was very interesting to me as
Speaker 1: well as being kind of from the finance side of things,
Speaker 1: like I went to one year of university setting UH
Speaker 1: finance and economics at UH the University of Vermont Business School, UM,
Speaker 1: and I dropped out to pursue bitcoin because it seemed
Speaker 1: like it was this this area that you know, it
Speaker 1: was an arena of ideas and credit it didn't matter
Speaker 1: one bit. And I was like, all right, well, you know,
Speaker 1: why am I trying to get some some business degree
Speaker 1: when I'm like spending all my time learning and thinking
Speaker 1: about this thing. Anyway, you don't need any sort of
Speaker 1: credentials or or degree. You just you know, put out
Speaker 1: put out content or or not even put out content.
Speaker 1: But just like again, it's their arena of ideas. This
Speaker 1: is everybody is trying to provide value here. Yeah, this
Speaker 1: is where the world is shifting right now. I was
Speaker 1: on a on a Twitter spaces with Preston Pitch and
Speaker 1: somebody was saying, Hey, we need to figure out ways
Speaker 1: that we can go educate all these lawmakers and stuff
Speaker 1: and educate people so they can really dig into bitcoin.
Speaker 1: And Preston said, I'm not interested in that. He's like,
Speaker 1: I put out content. If you want it, it's here,
Speaker 1: come and engage with it. He said. But this is
Speaker 1: really going to be a shift in the world because
Speaker 1: what we have, this system, this feat money system we
Speaker 1: have today is built off elitism. Right, if you can
Speaker 1: be close to the money supply, you can be And
Speaker 1: I used the word elitism like I wouldn't hire any
Speaker 1: of them to run in my run work in my business. Um,
Speaker 1: they have no quality skills. But because they're close to
Speaker 1: the money, so why they're good of politics? They can
Speaker 1: get ahead and Um, what's what we have now is
Speaker 1: we have the shift to meritocracy right where our hard
Speaker 1: work and our effort can get us ahead. And so
Speaker 1: that's what Preston was saying, is like, look, my content
Speaker 1: is there. If they want it, they can come get it.
Speaker 1: But what we're seeing is we're ending the money printer
Speaker 1: elitism and those people are not going to get on
Speaker 1: the new program. And so we're gonna see wealth shift
Speaker 1: to people who are putting the work in um. And
Speaker 1: I love that perspective. That's kind of what you did, Dylan.
Speaker 1: I mean you, uh, you you found something that you're
Speaker 1: interested in. You dug in and and and Yeah, to
Speaker 1: be good at something you have to put that time
Speaker 1: commitment in which what you did and in college gets
Speaker 1: you to think general about everything, right like uh, forty
Speaker 1: you're a dabbler, forty five minutes here, forty five minutes there,
Speaker 1: an hour or they're kind of a thing. So um,
Speaker 1: So you look at the Entian data. Now you mentioned
Speaker 1: it's the only Bitcoin is the only thing that has
Speaker 1: an audible like auditable data. Um. And that's pretty interesting.
Speaker 1: So when you look at financial markets, if you're studying
Speaker 1: energy markets, oil markets, stock market, etcetera, you don't have
Speaker 1: the data that you have with bitcoin. Is that maybe
Speaker 1: something that kind of attracted you a little bit? Yeah,
Speaker 1: I mean I really just as I came to understand
Speaker 1: the properties of bitcoin and and the things like you know,
Speaker 1: running a node, what is a node? How the bitcoin
Speaker 1: network operates? Absolute scarcity? Why has that never been a
Speaker 1: thing before? How did bitcoin solve that? How did Satoshi
Speaker 1: Nockamoto solve that problem of the double spend problem, of
Speaker 1: of absolute scarcity, of digital scarcity? Um? And so when
Speaker 1: I came to understand all those things, I was really
Speaker 1: kind of my mind was blown, and I realized I
Speaker 1: needed I was in college. I was like, I need
Speaker 1: as much bitcoin as I can. So I dropped out
Speaker 1: and I didn't do a bitcoin job I had. I
Speaker 1: was just like, you know, passionately reading and learning in
Speaker 1: my free time. But I was like doing manual labor,
Speaker 1: Like I wasn't doing bitcoin analysis or anything full time remotely,
Speaker 1: Like I was listening to podcasts of Mark Moss and
Speaker 1: Preston Pitch while I was while I was wiring outlets.
Speaker 1: Like it was like a very you know, humbling kind
Speaker 1: of uh you know, nine twelve months. But um, as
Speaker 1: I kind of consumed all that information free, I was
Speaker 1: I started to uh contribute a little bit more and more,
Speaker 1: and Twitter d M turned into a role kind of
Speaker 1: um doing some of the stuff that I really like.
Speaker 1: But in terms of why it fascinated me, um, I
Speaker 1: don't know. Just like the on chain kind of analytics
Speaker 1: and it gets a bad rap or I think maybe recently,
Speaker 1: especially in draw downs. The thing that launching analytics is
Speaker 1: so cool, uh, is that well, one, if you're just
Speaker 1: talking about price, it could be about mining, hash rate,
Speaker 1: literally any of the economics of the Bitcoin network, transaction fees, like,
Speaker 1: it doesn't have to be price analysis. That's one in
Speaker 1: terms of watching analytics. And two is that we can
Speaker 1: we can quantify supply side dynamics. And so if you
Speaker 1: look at like any any of the parabolic bitcoin runs
Speaker 1: throughout history, it got to a point where the supply
Speaker 1: side had increased so much there were so like the
Speaker 1: hogglers of last Resort, Like you can feel that when
Speaker 1: people are like I'm not selling, I'm buying more with
Speaker 1: on chain instead of it being anecdotal, you can see
Speaker 1: it and it's and it's verifiable and seeming like, oh
Speaker 1: my god, Like of the bitcoin supplies is by people
Speaker 1: that haven't spent it in six months and so like
Speaker 1: any marginal buyer comes in, like we go parabolic when
Speaker 1: a wall of money hits not a lot of supply,
Speaker 1: and with on chain, we can like literally see that
Speaker 1: accumulation of the years of accumulation and then like a
Speaker 1: six to twelve month bull run where all of this
Speaker 1: kind of hoddle supplied distributes and so like I'm just
Speaker 1: naming an example, but it's really fascinating for the first
Speaker 1: time because we can see all of this happen, uh,
Speaker 1: and with full transparency and then mutability, like it's it's there,
Speaker 1: it's recorded forever. Um. If you ask how many U
Speaker 1: S dollars are in circulation, No, it's credit based, right,
Speaker 1: there's there's euro dollars, there's it's it's all fractional reserved,
Speaker 1: like no one knows how much gold even even like
Speaker 1: like sometimes it's like in the equity markets, it's like
Speaker 1: how many shares are outstanding? No one don't even know.
Speaker 1: Like GameStop had more shares shorted than there was shares
Speaker 1: that's standing. It's like how does that happen? Um? So
Speaker 1: with bitcoin, right, the trends, like that's just the transparency
Speaker 1: of it all and the analytics side. That framework kind
Speaker 1: of fascinated me. So, UM, I want to talk about
Speaker 1: what are maybe some of the one or two or
Speaker 1: your top favorite UM indicators to look at on chain. UM,
Speaker 1: I want to talk about how we look at those
Speaker 1: and kind of differences and and what they really mean.
Speaker 1: And then I want to take that and then look
Speaker 1: at that and compared against this macro backdrop that we
Speaker 1: have going on with the Phoedero reserve and these FED
Speaker 1: meetings they had this week and this kind of stuff. UM,
Speaker 1: I'm in the studio with Dylan Leclair. You're listening to
Speaker 1: the Mark Moss Show talking about bitcoin, talking about on
Speaker 1: chain data with Dylan Leclair. UM, we'll be back in
Speaker 1: a second. Do not go away, all right? You are
Speaker 1: back listening to the Mark Moa Show and we're talking
Speaker 1: about bitcoin and cryptocurrencies in this decentralized revolution that is
Speaker 1: happening right now. I am UM in the studio with
Speaker 1: Dylan Leclair. You can find him on Twitter at Dylan
Speaker 1: Leclair Underscore and UM. He's a market analyst with Bitcoin
Speaker 1: Magazine looking at specifically mostly on chain data, which is uh,
Speaker 1: looking at the data about coins moving, how old there are,
Speaker 1: things like that and there's a lot of information we
Speaker 1: get from that now, Dylan. Um, before the break, I
Speaker 1: said that I was hoping that maybe you'd give us
Speaker 1: maybe your top couple things that maybe do you think
Speaker 1: are important or that people should look at, Like maybe
Speaker 1: it's m v r V or something like that. Do
Speaker 1: you have a couple like that? Yeah, I mean you're
Speaker 1: that on the money that That was the one I
Speaker 1: was going to throw out. So with bitcoin, right the
Speaker 1: full transparency of the network, we can essentially see what
Speaker 1: coins moved when, and we can match that up with
Speaker 1: what the price of bitcoin was when that like what
Speaker 1: what was bitwin trading at when those coins are technically
Speaker 1: they're called u t xos when they moved. Um. So
Speaker 1: we can see like do things like say, what's the
Speaker 1: average cost basis of every coin in the network? Um?
Speaker 1: And so right now currently that average cost basis bitcoin
Speaker 1: like the on chain average price when bitcoin was last moved.
Speaker 1: So that means you look at a coin and the
Speaker 1: last time it moved and what the price was when
Speaker 1: it got to that wallet or that address. Yeah, exactly.
Speaker 1: So if you want to think of it, maybe this
Speaker 1: is an easier way to think of it. So there's
Speaker 1: a market cap is circulating supply times the current price.
Speaker 1: What we what we can do is we can have
Speaker 1: what's called the realized market cap or it's called realized cap,
Speaker 1: where it's the circulating supply and the price the coins
Speaker 1: last moved. But for every individual coin, every single setoshi,
Speaker 1: we can see when it was last moved with with
Speaker 1: perfect record, and so the where the market cap is,
Speaker 1: say what is it today, seven hundred billions something around there,
Speaker 1: uh seven billion, The realized cap figures like fourty um
Speaker 1: and so we can see so that translates to like
Speaker 1: thirty six thousand dollar bitcoin dollar realized price UM. Just
Speaker 1: it's the same metric divided by circulating supply, and we
Speaker 1: can just like do things like take a ratio of
Speaker 1: those two metrics price versus. That's almost like if you
Speaker 1: want to think of it as like the intrinsic value
Speaker 1: or the subjective value of the network from every hoddler,
Speaker 1: we can kind of see the bull and bear cycles
Speaker 1: play out with this with the ratio of these two metrics.
Speaker 1: With that what's it called market value to realize value,
Speaker 1: you brought it up first, you know your stuff, and
Speaker 1: the r V ratio you can kind of see these
Speaker 1: bull and bear cycles where price runs way way ahead
Speaker 1: of its on chain basically like on chain cost basis
Speaker 1: on chain value. Uh. And as as more money comes
Speaker 1: in and more those coins kind of get further distributed,
Speaker 1: what happens is that that realized cap rises. So, if
Speaker 1: you like, if you're thinking of bitcoin as an asset
Speaker 1: monetizing just to centralized monetary asset, air dropped under the
Speaker 1: world and No. Nine, what's been happening since? Well, people
Speaker 1: say it's it's it's so volatile, But if you just
Speaker 1: look at realized price, it's in a log scale, it's
Speaker 1: going it's just bending upwards, flatlining for a couple of years,
Speaker 1: bending upwards, flat laning for a couple of years, and
Speaker 1: it's pretty remarkable to see. Uh. And it kind of
Speaker 1: strips away from that day to day volatility that that people,
Speaker 1: you know, that gives bitcoin kind of a bad rapp
Speaker 1: to people that aren't too aware of what's happening. So
Speaker 1: if I take that data that m v R V
Speaker 1: ratio um and I look at that data, um, what
Speaker 1: does it tell me? So it says, Okay, the realized
Speaker 1: value or the market cap value or whatever, last time
Speaker 1: those coins move is at um. So that's kind of
Speaker 1: like that sets the floor. So that means most people
Speaker 1: are sitting in profit, most of those coins are in
Speaker 1: profits day. And so then maybe you would extrapolate that
Speaker 1: to say that, um, until bitcoin breaks below that level, UM,
Speaker 1: there may not be this increased pressure to sell. Yeah.
Speaker 1: So bitcoin is dropped below it's it's realized value only
Speaker 1: like I think three or four times in history, and
Speaker 1: they've basically it's been um, it's not the exact you know,
Speaker 1: didn't bottom tick exactly at one point. Oh, and that
Speaker 1: that market value to realize value ratio. But really anytime
Speaker 1: it's dropped below it's realized price and v r V
Speaker 1: below one, it's been a generational buying opportunity in a
Speaker 1: bear market. And so if we want to think of it,
Speaker 1: like what's the lowest bitcoin you can drop, Well, no
Speaker 1: one knows, but if it God's twenty four thousand, you're
Speaker 1: buying it at the in terms of it's like relative valuation,
Speaker 1: you're buying it at like the first percentile of of
Speaker 1: if historical valuations. UM. And so that's just kind of
Speaker 1: how you can think of it in terms of relative value.
Speaker 1: And during bull markets, that'll that'll go out to five, six,
Speaker 1: seven times. It's it's realized price or it's like true
Speaker 1: price if you want to think of it like that.
Speaker 1: So you can just kind of see like relative market
Speaker 1: valuations compared to like historical values. Okay, so um in
Speaker 1: March when bitcoin just dropped right off of a cliff, Um,
Speaker 1: what did it go down to thirty or something like that?
Speaker 1: Was it below that level? It was I think the
Speaker 1: realized price there was like about dred so um, and
Speaker 1: and it was basically flatlined. It was also reached like
Speaker 1: about four thousand at the top of So even though
Speaker 1: bit win drew down in this huge boon bus, that
Speaker 1: realized price actually like it topped out around January and
Speaker 1: was flat for a couple of years. So it did
Speaker 1: drop below that in the in that March flash crash,
Speaker 1: which again marked generational body. So um, this is just
Speaker 1: one metric, but we kind of see, like you can
Speaker 1: you can really visualize well with this ratio the boom
Speaker 1: and bus cycles, bitcoins monetization phases. So how close are
Speaker 1: we to that generational buying moment at this point? As
Speaker 1: or huthing, it would be like, yeah, it's around two
Speaker 1: thousand and and you know, I doubt we get there
Speaker 1: unless we see some huge macro economic liquidity shock um,
Speaker 1: which honestly might be possible with with the FED trying
Speaker 1: to taper this, you know, bond market ponzi. Essentially, I
Speaker 1: don't know how far they get, but that's kind of
Speaker 1: more of a macro discussion less than an on chain discussion. Yeah,
Speaker 1: I want to jump to that, but before we do,
Speaker 1: is there one other indicator or on chain metric that
Speaker 1: you like to look at a lot? Yeah? I really
Speaker 1: like looking at Glass now classifies or quantifies long term
Speaker 1: and short term holders. It's kind of this arbitrary threshold
Speaker 1: that's not so arbitrary and it's more statistical reasoning. But
Speaker 1: long term holders a hundred fifty five days and the
Speaker 1: coin waits into that um into that value as a
Speaker 1: long term holder. Long story short. You can see during
Speaker 1: bowl and bear markets this huge kind of accumulation phase
Speaker 1: by long term holder um as coins age into that bucket,
Speaker 1: if you want to think of it like that. But
Speaker 1: you can see during consolidation phases or bear markets, long
Speaker 1: term holder supply just bends upwards. You just it's basically
Speaker 1: like no one's selling and and and you know this
Speaker 1: group of people around the world that's continually growing. They
Speaker 1: continue to buy. Uh. And during during bull markets or
Speaker 1: when bitoin goes parabolic, you see some of those coins distribute.
Speaker 1: But it's really interesting because eventually it gets to a
Speaker 1: point and whatever that point is who no one knows,
Speaker 1: but the dollar BTC ex change rate eventually gets to
Speaker 1: the point where there's a supply squeeze, like and that's
Speaker 1: kind of a meme like, oh, this's is on chain,
Speaker 1: it's a supply squeeze, But the reality is, UH, it's
Speaker 1: all supply and demand. And if we see this supply side,
Speaker 1: which on chain quantifies, continue to grow, eventually there's that
Speaker 1: marginal seller becomes exhausted and so we kind of see
Speaker 1: some of that accumulation starting again. UH. And for the
Speaker 1: last couple of months you saw more of a distribution
Speaker 1: effect that macro fears kind of scared everybody way, but
Speaker 1: it's just you know, if you look at those charts
Speaker 1: over time, and I try to post some of them
Speaker 1: my Twitter feed, the long and short term holder supply,
Speaker 1: it's relative supply and all of that is just you
Speaker 1: see the bull and bear markets in the data, in
Speaker 1: the accumulation and distribution, UH, and why the bull markets
Speaker 1: eventually happened. That's kind of that wall of money. It's
Speaker 1: not a lot of supply the bitcoin. So those are
Speaker 1: probably my two favorite metrics. UM. You know, you can
Speaker 1: look at the rate of change of long term and
Speaker 1: short term holders, or the total supply relative supply, that
Speaker 1: sort of stuff. So I want to ask you, UM,
Speaker 1: one of the biggest pieces of fud fear, uncertainty, doubt
Speaker 1: that I hear people throw out on on on bitcoin
Speaker 1: is that UM. Yeah, it's all concentrated at the top. UM.
Speaker 1: Right at the most most of the bitcoin is owned
Speaker 1: by a couple of addresses, and so somebody who looks
Speaker 1: at all the address data, I want to I want
Speaker 1: to have you answer that, UM. And then I want
Speaker 1: to get into UM, like I said, some of this
Speaker 1: macro stuff and see maybe what the macro backdrop looked
Speaker 1: at some of these other cycles UM and data and
Speaker 1: where we are today and what you think about that.
Speaker 1: And you're listening to the Markmas Show. We're talking about
Speaker 1: big coin, talking about the decentralized revolution. I'm in the
Speaker 1: studio with Dylan Leclair. We are talking about on chain
Speaker 1: data really of bitcoin, and then we're compared to the backdrop.
Speaker 1: I'll be back with more. Don't go away, all right,
Speaker 1: welcome back. You're listening to the Mark Moss Show, and
Speaker 1: we're talking about bitcoin. We're talking about this decentralized revolution
Speaker 1: that we are witnessing right now. I'm in the studio
Speaker 1: with Dylan Leclair. He's a market analyst with Bitcoin magazine
Speaker 1: U t x U x t O Management. Um, he's
Speaker 1: kind of a we don't like. We don't like labels
Speaker 1: and bitcoin, but I'd say he's a he's a specialist,
Speaker 1: we'll call it that. And looking at this unchained data now, Um,
Speaker 1: you were explaining two of your favorite indicators to look at,
Speaker 1: m v r V and long term versus short term
Speaker 1: holders Hoddlers. Um, I was gonna ask you about a
Speaker 1: piece of fud real quick, which is um that all
Speaker 1: the majority of the bitcoin is held by a couple
Speaker 1: of addresses. UM, give us the short version and why
Speaker 1: that probably is not true or is it true? The
Speaker 1: first thing to know is that one address does not
Speaker 1: equal one person. Uh, and oftentimes actually the biggest addresses.
Speaker 1: Although it's it is true that there are some some
Speaker 1: people out there with a lot, a whole lot of bitcoin. Um,
Speaker 1: just from understanding that and and not losing it in
Speaker 1: the early days. Uh, the reality is that these huge,
Speaker 1: these huge addresses. I mean, there's two point five million
Speaker 1: bitcoin on exchanges, and so you see a lot of
Speaker 1: you know, the biggest addresses are actually um, not one person,
Speaker 1: but like ten thousand people, a million people, millions of people.
Speaker 1: You know, no one knows bitcoin is just as pseudonymous,
Speaker 1: so you can you can see a lot of these
Speaker 1: addresses are are exchange balances. And when anyone presents the
Speaker 1: data in kind of a malicious way saying x amount
Speaker 1: of bitcoin is held by the top x amount of addresses,
Speaker 1: and it's a really shocking number, the reality is that
Speaker 1: bitcoin is probably uh, you know, on behalf of tens
Speaker 1: of millions, hundreds of millions of people. If you just
Speaker 1: think about say gray scale bitcoin has six thousand bitcoin
Speaker 1: and their trust, but that trust is owned by institutions
Speaker 1: and retail investors and and all the like. So I
Speaker 1: think that's the food there. It's it's a little bit uninformed.
Speaker 1: It's like saying, uh, the Federal Reserve owns of all dollars.
Speaker 1: You know, that's almost like probably more accurate if you're
Speaker 1: thinking about food m yeah, good point. Um. All right,
Speaker 1: so I want I want to kind of take so
Speaker 1: the on chain data, I guess um indicators usually are
Speaker 1: like lagging indicators, so they tell you what happened, but
Speaker 1: they're not always leading telling you what will happen. UM.
Speaker 1: Would you label on chain data as a lagging indicator
Speaker 1: or do you think there's a way to use it
Speaker 1: as a leading and more of a predictive indicator. Yeah,
Speaker 1: I mean I would say it's both. The thing about
Speaker 1: on chain is um it can be a leading indicator
Speaker 1: in terms of like so we can take some of
Speaker 1: these this data on the supply side data. Uh um,
Speaker 1: you know, I just kind of gave the most basic one,
Speaker 1: but we can. There's all sorts of kind of top
Speaker 1: slash bottom indicators, and what they do is really just
Speaker 1: try to quantify like risk reward in terms of like
Speaker 1: allocating to bitcoin. Um. So obviously, like, uh, what happened
Speaker 1: in the past, there is no indication of what's gonna
Speaker 1: happen in the future, but you can kind of see
Speaker 1: with a lot of these on chain metrics, like a
Speaker 1: relative when it's good to buy bitcoin versus when it's not,
Speaker 1: and it's good all the time. If you bought bitcoin,
Speaker 1: if you bought the local top quote unquote of any
Speaker 1: of the past bitcoin bubbles except you know the Uh,
Speaker 1: then then you're doing you're doing all right. Uh. There
Speaker 1: is no top ultimately in bitcoin, I believe, and it's
Speaker 1: all just local tops. But you can kind of quantify
Speaker 1: like Hoddler conviction and you can run and say relative
Speaker 1: to price and come up with, uh, you know, a
Speaker 1: ratio of how attractive it is or a metric of
Speaker 1: how attractive it is to allocate. And so that's just
Speaker 1: one of the things with on chain data, and we
Speaker 1: can quantify the supply side so when like you know,
Speaker 1: the supply side dynamics are are very attractive, still needs
Speaker 1: demand to come in, but we can we can see
Speaker 1: when those times are, which is one of the cool
Speaker 1: things about it. You know. Um, a lot of people
Speaker 1: say that like historically speaking, which we don't have very
Speaker 1: much historical precedents, but um, about eighteen months after the
Speaker 1: having cycle seems to be where the top is, and um,
Speaker 1: November is the top as of now. We never know
Speaker 1: the top until we look backwards on it. And I
Speaker 1: guess there's as you said, local tops different time frames, Um,
Speaker 1: but it looks like November was the top at least
Speaker 1: for now um and it was eighteen months after the
Speaker 1: having anything in on Chane data that that says anything
Speaker 1: about that, Yeah, if anything, I think the both, like
Speaker 1: all of really price action was driven by I mean,
Speaker 1: there was capital influence, but the tops and local bottoms
Speaker 1: were exacerbated by derivative price action. So uh, this isn't
Speaker 1: really on Jane data, but it's a big part of
Speaker 1: my day to day analysis is what's happening with Basically
Speaker 1: UM derivative bets on on the bit wins dom markets
Speaker 1: and so like you can for instant take your bitcoin
Speaker 1: and you can acquire that our margin or leverage it's
Speaker 1: called in the bitcoin market on top of that and
Speaker 1: bet on the price of bitcoin to go up or down.
Speaker 1: And that's basical that's what's called the bitcoin derivative. It's
Speaker 1: a futures instrument UM and a bitcoin. There's quarterly futures,
Speaker 1: so you can buy, say I'm gonna bet that the
Speaker 1: price of bitcoin is going up in you know, April,
Speaker 1: but it's also perpetual futures. It's basically a never ending
Speaker 1: futures contract that rolls over UM and so so like
Speaker 1: you know. That's that's where a lot of the volatility
Speaker 1: comes from. It's more so about traders were very very
Speaker 1: leverage long paying annualized rates just just to be long
Speaker 1: bitcoin on margin, and then at the bottom you were
Speaker 1: getting paid in in like say July when bitcoin is
Speaker 1: twenty nine thousand. It was the traders were so far
Speaker 1: positioned the other way that you were getting paid like
Speaker 1: a annualized rate to long bitcoin. So like these are
Speaker 1: some of the things where like you know, the data,
Speaker 1: the past cycles, the litter just like the coded into
Speaker 1: the bitcoin source code, like that, the having event where
Speaker 1: the blocks stuffs he gets chopped in half. Those things
Speaker 1: can't really predict all of this kind of human greed
Speaker 1: and emotion that's coming. Like that's in the crypto native
Speaker 1: asset class as well as like just kind of like
Speaker 1: it's development as a macroeconomic asset class. Right, Like this
Speaker 1: recent sell off, the correlation within the NASTAC it's been
Speaker 1: near one to one for about a couple of weeks um,
Speaker 1: and so that there's a reason for that. Yeah, So
Speaker 1: I just want to remind everybody as we're talking about
Speaker 1: these indicators, there's never one indicator that's conclusive you need
Speaker 1: to look at a bunch of different indicators from a
Speaker 1: bunch of different places to try to get the best
Speaker 1: idea that you can. And when you see a bunch
Speaker 1: of indicators from a bunch of different places all saying
Speaker 1: the same thing, it gives you a little bit more confidence.
Speaker 1: But even still then it's anybody's guess about the future. Now, um,
Speaker 1: jumping out a little bit. So we have this on
Speaker 1: chain data and leading lagging indicators, but then we have
Speaker 1: this Federal Reserve and this macro environment that's going on.
Speaker 1: The Fed met this week and I think kind of
Speaker 1: came out pretty hawkish, said they're sticking the course. You know,
Speaker 1: they're gonna taper, finished tapering by March, and then they're
Speaker 1: gonna start raising rates. Um. And that seems to have
Speaker 1: a big effect. So then, um, do you think that is?
Speaker 1: You know, at this point seems like it's what's driving
Speaker 1: the market. As you just said, I mean this this liquidity,
Speaker 1: it's kept the ratio of the you know, SMP pretty close. Yeah,
Speaker 1: I would think that. I mean what you saw is
Speaker 1: basically everybody kind of risked off. After Powell comes off
Speaker 1: and says, yeah, we were wrong, we were very wrong.
Speaker 1: Inflation is not transitory, and it's in their mandate. You know,
Speaker 1: that's there's an employment mandate and inflation mandate. We can
Speaker 1: debate the merits or or just like you know, of
Speaker 1: those two mandates and how effective chasing those two are.
Speaker 1: And I think we both say it's probably uh, not
Speaker 1: effective at all, um, and actually like it's pretty pretty
Speaker 1: bad that that we have essentially planned uh kind of
Speaker 1: economy around these two variables. It's horrible regardless, Uh, I
Speaker 1: think what we see here is that a lot of
Speaker 1: people are fearing um, basically a deflation event or a
Speaker 1: disinflationary event in terms of like the overall credit in
Speaker 1: the system, right, like what is March of what is
Speaker 1: two thousand eight? What is that? In terms of like
Speaker 1: why did that happen? It wasn't just people people started
Speaker 1: to sell because they were scared, No, it was like
Speaker 1: more of a mathematical driven thing in terms of the
Speaker 1: fiat units in the system and the obligations to dead
Speaker 1: obligations against that. Right, and like when financial assets fall
Speaker 1: and there's a lot and there's an asset liability mismatch
Speaker 1: on everyone's balance sheet, well there's a de leveraging event
Speaker 1: and it just cascades until the FED backstops at all
Speaker 1: and kind of comes in. And so I think ultimately
Speaker 1: we're going to see another one of those. Is that
Speaker 1: in two Who knows? But I think in terms of
Speaker 1: the FIAT environment, we've never been in a worse place
Speaker 1: in terms of how much debt is out there that
Speaker 1: did g d P. You can look at interest experience.
Speaker 1: I mean the national debts twenty nine trillion. Global debt
Speaker 1: to GDP is probably around fo. We're in a debt spiral.
Speaker 1: There's no way to ever pay it back because ultimately,
Speaker 1: like money is created through lending up, if we're going
Speaker 1: to see another deflationary event, how do you protect yourself
Speaker 1: against infinite counterparty risk? And if they reinflate the system
Speaker 1: after that, how do you protect yourself against the delustion
Speaker 1: inflation risk? And I think we both kind of have
Speaker 1: come to an answer there. Yeah, that's a great question
Speaker 1: that we will answer in just a minute. Because there
Speaker 1: is a deflationary crash, but there's also an inflationary crash,
Speaker 1: and most people don't realize that. They just look at
Speaker 1: their asset prices falling, but they could also inflate. But
Speaker 1: then the purchasing powers decimated, so those both both can happen.
Speaker 1: You're listening to the Mark Mo Show. We're talking about bitcoin,
Speaker 1: the decentralized revolution. We're talking about on chain data with
Speaker 1: Dylan Leclair. We're gonna be back and talk about how
Speaker 1: to protect yourself with more. So don't go away, Hey,
Speaker 1: welcome back. You are listening to the Mark Ma Show
Speaker 1: and we are talking about bitcoin in the studio with
Speaker 1: Dylan Leclair, talking about on chain data and the macro environment.
Speaker 1: And so before the break, Dylan, you were saying, how, um,
Speaker 1: you know, we're We've never been in a worse situation. Um.
Speaker 1: The FEDS tools of interest rates and monetary supply are
Speaker 1: kind of done. I mean interest rate through zero or
Speaker 1: negative in most parts of the world, and we have
Speaker 1: so much debt we don't have to do with it.
Speaker 1: Dollars of global debt has been created the last twenty months,
Speaker 1: twenty four months, and it's almost like, you know, they
Speaker 1: keep the if you look back through the last thirty
Speaker 1: or forty years, Um, it's like the markets keep trying
Speaker 1: to de leverage and then they just keep pumping them
Speaker 1: back up. And they try to deleverage, they pump back up,
Speaker 1: but every time they pump back up, it has to
Speaker 1: get bigger. And now that debt is just so big
Speaker 1: they can't manage it right, And it's like, uh, it's
Speaker 1: like so high that when the top moves, it starts
Speaker 1: getting out of control. And it seems to kind of
Speaker 1: be where we're at. Um, you had said that, well,
Speaker 1: you don't you know that there's going to be de
Speaker 1: leverage at some point. We don't know when. I think
Speaker 1: that's the question, right, Um, and then maybe there's some
Speaker 1: ways to protect ourselves. So how do you think through that? Yeah,
Speaker 1: I think ultimately and this comes this is kind of
Speaker 1: a completely different discipline than bitcoin itself, but more of
Speaker 1: a monetary history kind of things like ultimately, I think
Speaker 1: we're at the end of the near the conclusion of
Speaker 1: a long term debt cycle. So people kind of pittively
Speaker 1: understand like the dead cycle, or more so like the
Speaker 1: business cycle, right like, Okay, there's a boom and then
Speaker 1: a bust like that just happens, like people don't really
Speaker 1: question it. But these things, it's not like human productivity
Speaker 1: just dropped by ten in a in a year on
Speaker 1: a given year just out of randomness. It's it's it's
Speaker 1: more so it's it's a boom and bust in the
Speaker 1: credit system. It's a credit bubble and then ensuing uh, deflation. Right,
Speaker 1: it's an inflation and deflation. And then so if you
Speaker 1: just look at say like the ten year treasury or
Speaker 1: like interest rates the FED, the FED set interest rates
Speaker 1: over the last fifty years, you'll see you'll see a
Speaker 1: pretty clear pattern of just lower highes um. And so
Speaker 1: what's this kind of showing is literally the debt cycles
Speaker 1: in action, and now at zero, we seem to be
Speaker 1: at the conclusion of this. Right, the FEDS balance sheet
Speaker 1: is ballooned since oh eight because there's no other interest
Speaker 1: rates were already at zero. So we've been at a
Speaker 1: decade at zero, FEDS balance sheets at eight trillion and
Speaker 1: growing um. And this is a global phenomenon. So what's
Speaker 1: the conclusion of a debt cycle look like. Well, it's
Speaker 1: either a deflationary collapse back onto some sort of hard
Speaker 1: backing where most of the people that thought they had
Speaker 1: an asset lose it um. But now with FIAT there
Speaker 1: is no backing. So it's either a deflationary collapse where
Speaker 1: everything unwinds to zero. Literally like the asset side of
Speaker 1: your balance. It's falling, so you sell assets, your liability
Speaker 1: side is growing as a relative size, and it just
Speaker 1: cascades throughout the whole global economic system. Well that doesn't
Speaker 1: seem really politically feasible over a long term time frame, right,
Speaker 1: Like we can we can we can see this happening
Speaker 1: over a couple of months. But ultimately there will be
Speaker 1: a backstop because there has to be, right, just incentives
Speaker 1: are aligned for their to not let the system collapse.
Speaker 1: But if it does, you have you have some sort
Speaker 1: of thing you can fall back upon. But if they
Speaker 1: don't and they come in, they step in and they
Speaker 1: print and they expand the money supply because they have to,
Speaker 1: because that's how a fiat credit system works, well then
Speaker 1: there's the delution effect. Right, things are getting more expensive
Speaker 1: around you in that currency terms. So with bit colin,
Speaker 1: we kind of have the best of both worlds. We
Speaker 1: have an absolutely scarce monetary asset that is essentially engineered
Speaker 1: with how they pin mining works and how the supply
Speaker 1: istates works, engineered to increase its marginal costs forever or
Speaker 1: as long as hash rates increasing, as long as there's
Speaker 1: an economic consentive to mind bitcoin, which there is a
Speaker 1: strong one. Monetize any waste energy around the world and
Speaker 1: you can turn it into money. Um So, Bitcoin is
Speaker 1: engineered to be harder and harder to produce essentially forever.
Speaker 1: And at the same time, we have a native property
Speaker 1: right system built into it where you can actually self
Speaker 1: custody your own asset. You don't need to trust a bank,
Speaker 1: you don't need to trust the government, you don't need
Speaker 1: to trust the third party intermediary. Um So, in a
Speaker 1: deflationary event, in an inflationary event. If you want to
Speaker 1: view these outcomes as binary, uh, you're doing you're doing yourself.
Speaker 1: You know you're doing pretty well if you hold bitcoin. Uh.
Speaker 1: And that's why I think, and I've been kind of
Speaker 1: pushing this framework that everybody should hold at least a
Speaker 1: little bit um if you want to secure your wealth
Speaker 1: and time into the future. Yeah, you know these boom
Speaker 1: and bust cycles as you talk about these these credit cycles, Um,
Speaker 1: it's all fed driven. So if you go back and
Speaker 1: look at charts, I mean you can look back through
Speaker 1: hundreds of years and there's always booms and buss because
Speaker 1: we're humans, human action, human nature. Um. I love an
Speaker 1: ll ice cream. I want be all ice cream every day,
Speaker 1: but today I just want chocolate. I don't know why, right,
Speaker 1: So we we things go in and out of favor,
Speaker 1: we change our minds. Um. So so you know, well, shoot,
Speaker 1: we made too much of an ill ice cream. Now
Speaker 1: we don't have enough chocolate. And so there's there's a
Speaker 1: natural cycle. But if you look back through a hundred
Speaker 1: of years, you can see that it stayed, you know,
Speaker 1: in a pretty small channel. But right at at at
Speaker 1: um when the Federal Reserve was created, I mean, they've
Speaker 1: just gotten bigger and bigger and bigger if you look
Speaker 1: at the markets compared to gold anyway. Um. And so
Speaker 1: the the boom and bust cycles are because they they
Speaker 1: dump a bunch of currency units into the system and
Speaker 1: it creates this big boom and then they kind of
Speaker 1: gets too overheated, so then they suck it out and
Speaker 1: then it just pulls it back down and then they
Speaker 1: have next time they have to put even more in
Speaker 1: and it gets bigger, and so each one just gets
Speaker 1: bigger and bigger. So what I would just say is that, um,
Speaker 1: while it is a little bit natural, because like I said,
Speaker 1: human nature, UM, it's gotten way exaggerated because of the
Speaker 1: photos and The problem is that we don't know when
Speaker 1: they're going to decide to suck the money out of
Speaker 1: the system. Right, So, like we've done the best that
Speaker 1: we can, and we've tried to keep our head afloat
Speaker 1: during that inflationary growth um, and then and then all
Speaker 1: of a sudden they can just pull it back out. UM.
Speaker 1: So shoot, I guess either way we're protected with bitcoin. UM.
Speaker 1: At this point, we're stuck trying to be a psychic
Speaker 1: because like, I don't know what they're gonna do. Right,
Speaker 1: at some point they're going to have to step in
Speaker 1: and pump it back up. But will that be at drop?
Speaker 1: That's kind of what history tells us, right, will it
Speaker 1: be a drop? So if you had to, if you
Speaker 1: had to consult your crystal ball, Dylan, which I know
Speaker 1: you don't have one, I wish you. I'm sure you
Speaker 1: wish you did. Uh. What do you think? What do
Speaker 1: you think happens over the next year two years? I
Speaker 1: think you know, if you're just looking at historical equity valuations,
Speaker 1: we're still at outrageously high equity market to just GDP readings,
Speaker 1: I think it's like a hundred or something, pretty pretty crazy. Uh.
Speaker 1: And yeah, we live in a globalized world, so there
Speaker 1: might be some flaws in the reading, but just you know,
Speaker 1: whether it's a pe rate here, right, we're historically overvalued,
Speaker 1: and equities we saw we saw this year there's a
Speaker 1: hundred billion dollar car maker with zero revenue like this
Speaker 1: is this is the type of thing you see at
Speaker 1: the end of everything bubble. So in terms of how
Speaker 1: far conequities or even like say housing, you see mortgage
Speaker 1: rates start to go up at the FED stops buying
Speaker 1: mortgage rate uh mortgage backed securities, which they've been doing
Speaker 1: at a forty billion a month clip for the past
Speaker 1: like sixteen eighteen months. What what you know? What happens
Speaker 1: after that, Well, we'll have to see. But I think
Speaker 1: at a certain point as a pain threshold in markets
Speaker 1: where uh, it kind of cascades and gets out of control.
Speaker 1: And so I think the Fed doesn't wants to wants
Speaker 1: to kind of let the market deflate a little bit,
Speaker 1: let let it pull back more So with just words, right,
Speaker 1: they haven't even cut interest rates yet, haven't even hyped
Speaker 1: interest rates. They're still at zero and the markets freaking
Speaker 1: out that they might go to fifty basis points, which
Speaker 1: is kind of laughable in real terms. But I think
Speaker 1: ultimately real yields can't go above zero. And so if
Speaker 1: the bomb market starts to sell off, if literally every
Speaker 1: asset sells off, we're gonna see some really wacky stuff happened.
Speaker 1: I mean, we're in late stage FIAT in in my
Speaker 1: humble opinion, just in the historical terms, we've never been
Speaker 1: in a bigger, bigger global everything asset bubble ever um,
Speaker 1: And so I guess you kind of have to think
Speaker 1: to yourself, what's the other side look like? And trying
Speaker 1: to you know, interpret what tide Drone power wears on
Speaker 1: a Wednesday is kind of tough. But if you understand
Speaker 1: the endgame, uh, and where this is all going in
Speaker 1: terms of you know, we're going to tell our kids
Speaker 1: one day that, yeah, the whole world watched her own
Speaker 1: power or one guy say what the price of money
Speaker 1: was going to be next week. Um, that's gonna be
Speaker 1: obsoleted eventually, But it's a process, and so you know,
Speaker 1: keeping that long term vision uh in mind, Uh, I
Speaker 1: think is important. And you know there's gonna be volatility,
Speaker 1: not just in Bitcoin but in everything as this this
Speaker 1: everything a bub both the tracks and expands and and
Speaker 1: it's like almost like a system kind of dye. Yeah. Yeah,
Speaker 1: that's a good point. Um. The one thing that we
Speaker 1: also also have to keep in mind is that the
Speaker 1: law of diminishing returns kicks in and so in the
Speaker 1: Kinsey And system of this uh non never ending monetary stimulus. Um,
Speaker 1: there's a Kinsey And multiplayer, which basically means that what
Speaker 1: they're trying to do is if they lose a dollar
Speaker 1: from the economy, they want to borrow fifty cents to
Speaker 1: get the dollars growth. Once a nation gets over to GDP,
Speaker 1: that multiplayer goes down to a sense where they're not
Speaker 1: getting enough growth anymore. So now for fifty cents are
Speaker 1: getting cents of growth, and then fifty cents of growth,
Speaker 1: and then finally they're getting for fifty cents are getting
Speaker 1: thirty cents of growth, and then they're just digging themselves
Speaker 1: deeper in the whole. So it's not like they can
Speaker 1: just keep this going forever. At some point the music
Speaker 1: stops and that they just don't get that growth. So Um, anyway,
Speaker 1: interesting stuff, Dylan, thanks so much for listening. You're listening
Speaker 1: to the Markma Show. We've been talking about bitcoin. We've
Speaker 1: been in the studio with Dylan Leclair. You can find
Speaker 1: him on Twitter at Dylan Leclair Underscore and uh he's
Speaker 1: he's a contributor market analyst for Bitcoin Magazine. Does great work.
Speaker 1: You should give him a follow. Um, that's what we
Speaker 1: got for you today with bitcoin and you know how
Speaker 1: to protect yourselves. Thanks for listening.